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Good afternoon, ladies and gentlemen.
Bonjour à tous.
Welcome to meeting number 73 of the Standing Committee on Industry, Science and Technology.
We are actually having two one-hour meetings, because although we know technology is moving at a rapid pace, there's still a complication with having multiple languages by teleconference. That's why we're separating the two meetings into one-hour meetings.
In our first meeting we'll have Martin Lavoie with us here live. He's the director of policy, manufacturing competitiveness and innovation with the Canadian Manufacturers and Exporters. By video conference, from the Fédération des chambres de commerce du Québec, we have Françoise Bertrand, president and chief executive officer, as well as François Morin, chair of the information technology committee.
We'll begin right now, and we'll start with our live witness first.
Mr. Lavoie, I believe you've been told you have about six minutes for your opening statement, so please go ahead.
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That's what I was told. Thank you.
I'm live and I'm not a robot. Thanks for inviting me.
Mr. Chair and members of the committee, thanks for the opportunity to discuss the importance of the adoption of digital technologies among SMEs.
For many SMEs, the adoption of digital technologies in the business context is often referred to as electronic commerce. In manufacturing, however, electronic commerce goes beyond the traditional activities of buying goods or services through the Internet. We estimate that business-to-business transactions represent between 80% and 90% of all e-commerce activities. Those business-to-business transactions happen in two major fields of business activity in our membership: supply chain management, where suppliers are integrated in the manufacturing process and parts and components can be ordered and delivered just in time; and research and development, where digital solutions are used to share and analyze large data and to perform simulations jointly with research partners.
In addition to business-to-business platforms, digital technologies are also used in the manufacturing factories in areas such as R and D, rapid prototyping, and assembly lines. The adoption of digital technologies has already had a huge impact on the productivity of companies. Today, companies are able to develop, design, test, market, and sell complex consumer products using e-commerce tools and by tying various global suppliers together virtually. For example, cars and trucks in the automotive sector, which a decade ago took about five to seven years to get from concept to the local showroom, are now brought to market in two to three years, on average. Corporate research and development, while still centrally controlled, is now conducted throughout various portals globally.
In Canada, about 50% of all investments in machine equipment are in equipment related to information and communication technology. If you compare it to 20 years ago, almost 100% of machinery and equipment investments were in non-ICT equipment, so we've made a lot of progress. However, a lot of work still remains to be done. One of the challenges we have in Canada is to accelerate the adoption of digital technologies by companies so we can catch up with the rest of the world, particularly with the United States. According to the latest “State of the Nation” report published last week by the Science, Technology and Innovation Council, in 2009, Canada ranked 9th out of 20 countries with respect to business investment in ICT equipment. Although Canada ranks higher than some of the key advanced economies, such as France, Japan, Finland, and Germany, it still trails the top five performers: the U.S., Sweden, Denmark, the United Kingdom, and New Zealand. Compared to the U.S. alone, Canadian companies invest about 42% as much in ICT equipment as their U.S. counterparts.
Let me talk a little bit about what we think governments could do to accelerate the adoption of ICT equipment among SMEs.
The first way would be to look at the tax treatment of ICT equipment. This would be capital expenditure related to information communication technology. Although Canada has made some progress in recent years to allow companies to depreciate a larger share of their investment in ICT machinery and equipment, most other countries have taken a much more aggressive approach to accelerate the adoption of digital equipment. As an example, the elimination of capital expenditure under the scientific research and experimental development tax credit, to be implemented fully next year, is going to make Canada one of the few countries in the world that does not offer a significant tax credit or an accelerated depreciation rate for the adoption of ICT equipment for R and D purposes. I would strongly encourage the government to revisit its decision to completely eliminate capital expenditures under the SR and ED program.
In terms of machinery and equipment used for actual production, so no R and D purpose, again, there are no specific tax incentives in Canada to accelerate the adoption of ICT equipment. The accelerated capital cost allowance for machinery and equipment used for manufacturing and processing does not cover computers, data processing systems, and software, which are in a different class of assets under the CRA rules. However, the federal government did provide an accelerated capital cost allowance specifically for ICT equipment between 2009 and 2011, but that lasted only two years.
The second way to accelerate the adoption of ICT equipment would be to explore other forms of support, such as direct funding or innovation voucher programs. Because accelerated depreciation might not be enough, especially for SMEs that are not yet profitable, the accelerated depreciation is not fully useful for them. This is why other countries have used technology voucher programs to accelerate the acquisition of digital equipment. Countries such as Austria, Belgium, Denmark, Finland, the Netherlands, and the United Kingdom have all implemented voucher systems, with more countries attempting to follow this path. A program can be set that offers vouchers for the purchase of advisory services in e-commerce, systems integration software, or digital content. This is another area the government could look for in the Canadian context.
Although we do have in Canada a program called the digital technology adoption pilot program, referred to as DTAPP, I believe their funding is ending this year. It was a three-year pilot program. I'm not sure if it has been renewed or if it will be renewed.
The program was a good starting point, although the acquisition of computers, hardware, and off-the-shelf software is not eligible for funding under this program. A bit more than 600 companies will have received funding at the end of the three-year program. It's a good program, but you will agree with me that more could be done to reach out to more SMEs across the country.
The third point I would like to raise is about the open access policies, which are crucial to Canada's digital competitiveness. We often hear that Canada usually ranks poorly in terms of Internet prices and speed.
It's essential that the government implement open access rules that would force Internet network owners to share their infrastructure with smaller competitors. The choice is still very limited, and a lot of barriers are in place, so conversion to fibre networks in large commercial and institutional buildings is still very limited. I think you heard about this lack of choice from the CFIB when they appeared here. I won't spend too much time on it, except to say that we very much share the same concerns.
In conclusion, I remind you about the importance of the digital economy for productivity in manufacturing and in other sectors of the economy. I think looking at current programs and what is being done in other countries would be a good way to see how government can accelerate the adoption of ICT equipment.
Thank you very much.
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Mr. Chair, thank you very much for the opportunity to speak to the committee today.
As you know, technological innovation has always affected the way we do things and has directly contributed to global economic growth. Historically, Canada and Quebec have always been symbols in technological innovation. It's very important to point that out.
There are endless examples of technologies' positive impacts, and businesses from all sectors are constantly benefiting from the advancement in information and communications technologies. All too often, people forget that the first ATMs were designed and installed in Quebec, and that Montreal was the birthplace of word processing. The telephone was also invented in that city. Canada and Quebec have many world-class technology companies, global centres of expertise and multinationals. As a society, we must find innovative solutions to new challenges at all times.
Currently, we are seeing a slow-down in R & D, a shortage of specialized resources, training gaps and lack of advancement for young people. We are also seeing a drop in the support provided by governments, which have the ability to create conditions that foster innovation as a factor of competitiveness and productivity.
In order to ensure their future and distinguish themselves on the global stage, Canada and Quebec have to ask themselves the right questions. Reduced investments in information technology constitute a short-term solution. Of course, such a downturn helps strengthen a company's balance sheet, but only for a few quarters. Eventually, the company will lose not only its capacity for lower-cost production, but also its intelligence. It sacrifices its capacity to create new products and destroys its ability to manufacture them more efficiently.
Every significant study carried out in Canada and the United States has come to the same conclusions. We must encourage and invest in sources of long-term growth. Clearly, the technological sector will provide the foundations of that growth to improve productivity and provide our Canadian and Quebec companies with all the production flexibility the new world order calls for. The Fédération des chambres de commerce du Québec has a few relevant recommendations.
As governments, companies and organizations, we must promote a culture of innovation by raising awareness of the challenges involved and recommending actions that will position Canada and Quebec at the forefront. We must establish or enhance government programs targeting technological investment in businesses. We must develop a Canadian digital economy policy that fosters the development of innovation and productivity. We should also help Canadian leaders better understand the increasingly important role technologies play in the development of our economy, and encourage them to show commitment to that cause. We must also encourage Canadian companies to show leadership and mobilize in order to help us prosper as a country.
Finally, we must show that technological progress remains the best and the most effective catalyst for stimulating business innovation.
Thank you very much.
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In terms of the supply chain, you're talking more about web portals, about Internet services used in supply chain management. I guess 30 years ago you were managing your supply chain by taking the phone, sending a fax, making three carbon copies, or something like that. There was some time required between how many products you had in your inventory, ording your products through your supplier, and getting products to your customers. Using business-to-business Internet services, of course you can do that in real time.
This is not just in manufacturing. When you walk into Walmart and buy something, they automatically know how much is left in the inventory. There may be a message being sent to the supplier already to say, okay, we need to order 100 of these units. It will come automatically.
This is a huge productivity increase, when you think of it in these terms, but it's not referring to machinery and equipment; it's more referring to using Internet services to maximize the relationship with your stakeholders, with your suppliers, or with your research partners.
You now see a lot of use of high-performance computers to do simulation, for example. In certain sectors, such as aerospace, they will simulate a certain type of environment to how it affects a certain material. A high-performance computer can tie all of your research partners into the same virtual system.
That requires very advanced machinery, but I think the important thing to keep in mind is that this advanced software requires advanced computers, and these advanced computers require a rapid network. If you have old copper infrastructure in your building, you're not going to be able to acquire a high-performance computer and conduct your R and D.
That's why I also want to point out—the CFIB pointed this out as well, I think, when they came here—that there's conversion to be done, in certain types of buildings, from copper to fibre, for example, so that you can have all these great things that technology can give us.
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Thank you. We're very happy about that.
I want to thank our guests for joining us today. It will be a pleasure for me to speak to them in French.
I have read the evidence from our meeting last Tuesday. One witness said that Canada currently did not have a long-term digital strategy, and that this had repercussions on our economy. Mr. Lavoie, I think you mentioned that in your presentation, as did Mrs. Bertrand and Mr. Morin.
I would like to put my first questions to the representatives of the Fédération des chambres de commerce du Québec.
In Canada, we have no digital strategies or long-term visions, and harmonization is lacking among federal and provincial programs, and small and medium-sized companies. Do you have anything to say about that?
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Mr. Morin will probably be able to add something to my comments.
Yes, we think that a digital policy would be key for sending a message. The main issue is network accessibility. We have to ensuring accessibility to those networks by making information technologies sufficiently affordable. A strong dollar makes that possible.
In addition, we must have a consistent thought in order to support small businesses. My colleague, Mr. Lavoie, has talked about companies, but it's certainly a matter of medium-sized businesses and not small companies. They must be told that they need training.
Nowadays, having a good idea of accountability or legal conditions is no longer enough to manage a company properly. Companies now need to include in their team young people who are familiar with technologies in order to incorporate 21st century methods into their marketing and their business networks. A digital policy could certainly provide the required financial incentives, but it would, above all, clearly announce that companies must keep pace with various digital trends. Fibre optics are not the only area of focus, as the industry is increasingly turning toward mobile platforms.
Would my colleague like to add something to this?
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Absolutely. I agree with you that those programs were somewhat piecemeal.
The adoption of digital technologies is a means to an end. I think that the end we are trying to attain is greater productivity. The adoption of digital technologies is not the only way to get there, but it is part of a broader set of tools. Mrs. Bertrand was talking about workforce training. Of course, that is another option. The treatment of expenditures in the tax system is another very important way to achieve that. We cannot, on the one hand, want companies to purchase more equipment and, on the other hand, eliminate the tax treatment that makes it possible to buy that equipment. That is contradictory.
Between 2009 and 2011, accelerated depreciation occurred in the case of certain telecommunications pieces of equipment, such as computers, but that only lasted for two days. The objective was to stimulate the economy during a period of global recession. I think that the long-term objective is not only to stimulate the economy, but also to really improve productivity. I think that's a long-term objective, and we could apply that objective over the next 50 years, if we wanted to.
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Mrs. Bertrand, I would have liked to hear your opinion.
I think there is a great deal to be done when it comes to the upcoming spectrum auctions. It is important to make broadband spectrum available in telecommunications.
That brings me to another very important debate in telecommunications—the deregulation of foreign investments in digital economy planning.
Overall, some thought should be given to the spectrum allocation process. That is what we are calling for in the area of digital economy. As our colleague Mr. Lavoie said, we want this to be given due consideration. We want questions to be asked and answers to be provided. We also want Canada to adopt a digital economy strategy that would include telecommunications, information technologies, applications, and software and equipment development.
I think that all those factors should be taken into consideration in the development of a digital economy strategy. Those factors include all the technologies in our society that would enable Canada to reclaim its position as a global leader. That is what we are currently missing.
Thank you very much to our witnesses for being here this afternoon.
I'd like to start actually by asking both presenters—I'll begin with you, Monsieur Lavoie—about the technology or the innovation voucher system that both presenters spoke about.
Monsieur Lavoie, starting with you, if you could, please elaborate on that program, how it might look, how it might operate. You mentioned some countries that have these technology voucher programs. Could you maybe point to one or two best-practice scenarios for us?
A third part of my three-part question is, how would such a program work alongside SR and ED, if it existed?
Among the countries I've reviewed that provide voucher system programs for adoption of digital technology, some of them cover, more specifically, electronic commerce programs, for example, which are probably broader than those that would be accessible for a bunch of different industries.
Certainly for our sector, manufacturing, an electronic commerce kind of voucher would be interesting. When you talk about supply chain innovation and when you talk about joint research and development, these two areas would probably be interesting.
In terms of specifically digital programs, like electronic commerce incentives, you're talking about countries like Italy, which has an interesting one.
There are other programs, such as those in the Scandinavian countries. For example, in Finland and Norway they are more like digital innovation programs that go beyond electronic commerce. This is where I think manufacturing could also benefit, because electronic commerce, of course, is only one of the digital technologies in our sector. As I said before, how do you actually convert some of your old machinery and equipment into modern machinery and equipment that is tied into the Internet system so that you can then acquire some data about your production processes?
That would be a nice way to compensate for the elimination of machinery and equipment used for R and D purposes and not necessarily just for fabrication. That would compensate for the elimination of capital expenditures under the tax credit. So when I was making a reference to SR and ED, I was making reference to the elimination of the capital expenditures eligible under the tax credit.
A tax credit and a voucher are two different ways to achieve the same objective.
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I think we agree in saying that productivity is one of the key factors of economic growth. That's especially the case in the manufacturing sector, but also in other sectors. Think of the retail industry and other sectors where productivity issues can result in a price drop with regard to the number of units sold. In our sector, we are talking about units produced.
When it comes to that, an increase in productivity is the only way to provide a long-term response to the challenges our sector has been facing over the past 10 years. We are facing increased international competition from countries where labour is much cheaper than in Canada. We also have a dollar whose value has gone from under $0.80 to parity with the U.S. dollar. In the long term, greater productivity is the only thing that will allow Canada to manufacture products at the same price as those from countries like China, where workers have lower wages.
In Quebec, the company Mega Brands has invested in the automation of its Montreal factory and has repatriated to Canada the production that was previously being handled in China. The $30 million it has invested in its factory to improve productivity has made that repatriation worth its while. This way, the company is reducing the risks stemming from manufacturing in a country it is less familiar with.
I want to come back to what I said in the beginning. Many people think productivity implies that people will no longer be involved and that only machines will handle the production. That's not how I see things. I think that, by reducing labour costs, we can be more productive, thus enabling us to manufacture here products that would normally be manufactured in countries with cheaper labour. Our labour has become fairly expensive. Over the past 10 years, the manufacturing sector has gone from an hourly rate that used to be half as much as it was in the United States, to a rate that is now slightly higher than it is in the U.S. We are not even talking about China here. We are talking about the United States. Our labour is more expensive than U.S. labour, and we have a productivity deficit of about 50%. Currently, our problem is twofold, and we need to resolve it.
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Some types of innovation lead to an increase in productivity, while others are less related to productivity.
There are four major areas of innovation. One of them is product innovation. If I design a new telephone, that is a new product. Another area is process innovation, which has to do with the way a machine is produced. That machine does not necessarily have to be a new product. There is also supply chain innovation, which is often referred to as organizational innovation. That has to do with the way companies manage their relationships with their suppliers, clients and so on. The last area is marketing innovation.
In sectors such as agri-food production, innovation is often related to the way products are presented to consumers. That's important. Many inventors design products in their basement, but they don't know how to market them. I think it's just as important to be innovative in marketing as it is to be innovative in processes and products.
As for which types of innovation help increase productivity the most, process innovation is definitely the first one I think of in terms of productivity, since it has to do with the way things are done. Product innovation is much less related to productivity. Its main goal is to penetrate new markets and manufacture new products. Organizational innovation also has an impact on productivity. It improves supplier response time when a component is needed to manufacture a piece of equipment, or when products must be delivered to clients. Marketing innovation is more related to product innovation than to productivity.
Basically, I would say that process innovation and organizational innovation have the biggest impact on productivity.
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This is a matter of strategy.
We clearly have a problem in terms of skills. These are technological professions, and that's one thing, but there are also positions for managers who understand technologies, who promote them and know how to benefit from them. It seems to me that this could be a very good fit for women who don't want to have a career in technology.
As we know, most business schools are currently attended by both men and women. So it would be extremely important to demystify technologies in those schools and teach future managers that, without technology, their companies, regardless of the sector they are in, will not be able to remain competitive. We may be talking about competitors across the street, but also about international competitors. Globalization is not ready to go away—quite the contrary. The requirements and challenges will increase.
That's why I am talking about skills again. In Quebec, and in Saguenay, more specifically, this is not an issue of access. Information technologies are available. People have access to the Internet and to broadband networks. However, how can we explain that more than three out of four companies in Saguenay have no website? That's really a basic tool.
We can criticize companies that are not renewing themselves, but all too often, I think we have to take initiative and remind people of what is absolutely essential. For instance, we have to remind them how they can use these opportunities to access markets, to access knowledge and services that would be impossible to have without information technologies, especially outside major centres.
I want to also thank the witnesses for being with us today.
I want to focus on a 2005 study from the Centre for the Study of Living Standards. I'm sure you're all aware of that. It highlighted the differences between what is happening in Canada and the United States.
I'm quite pleased that we have the president and chief executive officer with the chamber of commerce. In my riding of Langley, the chamber of commerce is very busy and connected in encouraging development using the Internet, creating Internet sites, and providing access to the market. In spite of that, I think a vast majority of people in small and medium-sized businesses who have been doing business for a long time are not changing with the times.
The government's responsibility is to create this atmosphere for being business friendly, and I think we are doing that. But how do organizations like the chamber of commerce, and other organizations, assist business to take that step, to change with the times and take advantage of the incredible opportunities they have?
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Thank you, Mr. Chairman and honourable members. I'd like to thank you very much for the invitation to attend your committee hearings today.
From what I can see from the list of eminent individuals and presenters the committee has had over the last little while, you're no doubt receiving significant input, and public policy input in particular, that you'll consider and reflect on as you formulate the report and recommendations. I'll confess at the front that I am not a technology expert, so don't ask me any really tough technology questions. My days of developing public policy are also long behind me. However, as the president of Coastal, I thought I'd offer you a glimpse into a Canadian company that has used technology to become a global player in a very large optical category.
Coastal, known in Canada as Clearly Contacts, was founded in Vancouver in the year 2000 by Roger Hardy and his sister Michaela Tokarski. Roger started the business with his Visa card, with a $5,000 spending limit and his life savings, which gave him a balance sheet of $6,000. The company last year had total sales of over $200 million. Roger remains active in the business as CEO, and Michaela sits as a member of the board of directors and now resides here in Ottawa.
Coastal's original business concept was to utilize the Internet to create an efficient method of connecting consumers with contact lenses. Historically, the category was categorized by high prices and mixed levels of service. The company remained privately held until 2004, when it undertook a small initial public offering on the TSX exchange. Last October, we listed on the NASDAQ in the U.S., and we trade on both the TSX and NASDAQ under the symbol COA.
Funds raised in that initial public offering were used to acquire a similarly sized business in Sweden that was essentially a contact lens mail order business with old-fashioned paper catalogues, etc. Coastal then moved that Stockholm-based company online and has since grown that business manyfold. We're the market leader in northern Europe, and a full 33% of all contact lenses sold in Sweden are sold through our website.
Since then, through additional acquisitions and organic growth, Coastal has grown to become the leading international online retailer of eyewear, including contact lenses, prescription eyeglasses, and sunglasses. Our business philosophy rests on providing world-class customer service, the convenience of ordering over the Internet, and extremely fast delivery, in most cases overnight. Coastal inventories everything we sell, with about 15,000 SKUs of contact lenses and about 3,000 SKUs of eyeglass frames, and has an unconditional 365-day customer return guarantee.
Coastal sources its contact lenses from the market leaders, such as Johnson & Johnson, Ciba Vision, Bausch & Lomb—now a Quebec-based company, if you saw the transaction last week—CooperVision, and Alcon. Over the years, we have developed strong working relationships with these suppliers. We are able to negotiate excellent terms based on high volumes, and we pass those savings on to the consumers. We typically offer consumers savings of approximately 20% to 40% on contact lenses, when compared with traditional optical retailers and eye care practitioners.
Approximately four years ago, Coastal entered the prescription eyeglass market with the same philosophy of offering convenience, speed, and great value. Coastal typically saves consumers up to 70% on eyeglasses when compared with traditional channels. To create a competitive business model in eyeglasses, we invested in the latest world-class manufacturing technology and have facilities located in Vancouver and Stockholm. The business strategy is working. Last year we shipped approximately one million pairs of eyeglasses, and we continue to grow.
To date, Coastal has shipped over one billion contact lenses globally. As a point of reference, we estimate that Coastal has now captured approximately 20% of the entire Canadian contact lens market and is approaching 10% of the Canadian eyeglass market based on units. Those are both online and off. We continue to invest in growing the nascent eyeglasses category with a strong focus on export. The online glasses market in the U.S., for example, is estimated to be penetrated less than 3% by the online sector. This is a market with $19 billion in revenue in this year. We think our online presence in this market has tremendous opportunity for growth.
Along the way, Coastal has also become a significant employer, with approximately 500 employees based in east Vancouver and approximately 750 employees worldwide.
Coastal is playing a key role in driving down the cost of vision care for Canadians and others around the world. We've developed a number of relationships with insurers and business customers, offering our strong value proposition to their employees and customers while at the same time reducing their costs and providing eye care benefits to their employees.
We recently signed an agreement to provide eyewear to persons supported by B.C.'s Ministry of Social Development. These are clients on income assistance or with disabilities. We'll deliver a higher level of benefits to these citizens at a lower cost to government. Find me another area of health care spending where the costs are going down.
But the benefits of these efforts don't flow only to the consumers or employees and our shareholders. One of Coastal's core values, posted on the walls in lunchrooms across the company, is “Do some good.” We've been active in our community, providing eyeglasses to those in need through our “Change the View” initiative. Our belief is that eyewear should be accessible to those who need it, and that traditional channels keep prices high, reducing access to those who need it most.
Some examples of this program in action are: providing those living in Vancouver's downtown eastside with eye exams and free glasses through Providence Health Care and the Union Gospel Mission; providing eyeglasses to elementary students in Ontario through the Toronto Foundation for Student Success; and providing eyeglasses to women in career transition through the Dress for Success organization.
Recently, we also undertook a mission to Kenya, in partnership with the Me to We foundation and Free the Children organization, an initiative that was a tremendous success. We delivered over 17,000 pairs of glasses and supplied equipment and training to set up a dispensing facility in a remote region in Africa, where previously these people had no access at all to any form of vision care.
Coastal is proud of its Canadian roots and is optimistic about the potential of the Internet and other technology to provide greater access to much needed vision care products around the world while creating a very successful Canadian export business and employing hundreds of Canadians.
This is just a quick example of how technology is changing the world by increasing the productivity of a sector and providing benefits and lower costs to government, businesses, consumers, and people in need across the globe.
Thank you very much for your time.
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I want to thank the committee and the chair for asking me to provide my perspectives today as well—especially via this medium of video conference—on this important topic. We've done a lot of work in this area, and plan to do much more, so it's our privilege to be here today.
As a not-for-profit organization, we call ourselves a think tank, which sort of conjures up the image of us sitting behind closed doors and thinking up solutions to some of the issues and challenges facing the country. While we do some of that, a lot more of what we do is engagement with a multi-stakeholder group of leaders from across the country in academia, industry, government, and other organizations. What I'm going to try to do today is provide a holistic perspective from these different stakeholder groups. That might provide value to your group.
In looking at ICT adoption among SMEs, we really see a maturity continuum, with some important considerations. At first we see automation as the simplest form of adoption. Really, it's about automating those existing business processes. It's mainly about bringing control and efficiency to the business. Of course, examples would include things like ordering, supply chain activities, inventory control, and so forth.
The next level of maturity along that continuum is around improved decision-making. Really, it's about bringing intelligence to management in this area and helping them to make better, more informed, and more timely and relevant decisions. In effect, ICT is providing that up-to-date real-time data to allow management to get themselves above the complexity of individual transactions, to see the bigger picture, hopefully leading to improved decision-making. There are a lot of examples in this area.
I know, for example, of a sawmill in Atlantic Canada that has applied CAD systems and other management systems to how they process lumber. They have this virtual technology that shows them how to optimize their processing to get the maximum yield from each timber coming through the plant. It's an SME, a small business, but it's a great example of an organization that understands the value of adopting technology for improved decision-making.
At the further end of the continuum, we see that adopting ICT in its most mature form really is about opening new markets and opportunities. It's really about identifying and exploring new markets, whether those are domestic or global markets. Really, at this level, ICT investment moves beyond infrastructure. It moves beyond simply being a method of efficiency to becoming an integral strategic asset for the business. SMEs are able to offer, for example, e-commerce solutions—as my colleague from Coastal just talked about—to reach global markets. It's about really seeing the strategic value of ICT investments in order to take advantage of global supply chains and global markets.
What we see as businesses progress through each of these levels is that they move from looking at ICT as a means to efficiency to really using ICT to be more productive and more innovative, hopefully leading to growth and export opportunities. It really allows management to step up, to be more strategic, and to leave the more transaction-based, simplistic forms of the business to a technology step.
What we've identified as a productivity gap in Canada is about $7,000 per capita for us compared to the U.S., related again to that productivity gap. We see innovation and, within innovation, ICT adoption as important drivers to help improve this productivity gap.
We also see that government can be a good catalyst for the adoption of digital technologies for SMEs. One example is CICP, the program under Public Works that is really helping businesses to gain that first sale within government. That can help to create a vibrant ICT community within the country that will hopefully translate into growth, into more adoption among other SMEs.
Another important program we've seen recently is DTAPP, the digital technology adoption pilot program, which is an Industry Canada program, obviously in partnership with the NRC. We think it's an important step towards helping SMEs adopt digital technologies, especially when you couple a program like that with some of the services offered by BDC. Really, we see some of these programs as important steps.
The key point in driving this digital technology adoption is that these programs need to be delivered under a coordinated, effective digital adoption strategy.
Thank you very much.
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Mr. Preston, do you feel, though, that the government could set the pace, could play a leadership role?
I was mentioning in our previous meeting that it's to align the planet so that everybody will be on the same page, and to just give leadership in making sure that the federal programs are aligned, that business is on board, and that everybody is.... Right now, we seem to see a piecemeal approach—small programs that get cut off, programs that are working well or are becoming well known. We have heard other testimony saying, hey, we didn't know there was this fabulous program, especially for the SMEs, the small and medium-sized businesses, and then the program, boom, is cut off, finished, because sometimes it lacks promotion, and it takes time.
I want your feeling on the leadership role that should be taken to have a strategy, and a long-term strategy, to align everybody alongside partners with business and things like that, that will correspond to business needs, and to have good communication there.
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You've shared your story with Clearly Contacts.
I started wearing glasses I think when I turned 25, maybe 20. My eyes progressed and the glasses needed to be tweaked and changed into bifocals and then trifocals. Over the years, it has been a challenge to get a set of frames that would fit. I would have my eyes checked and then I would try on different frames. Some of them would be too long along the side, some would be too wide. I have a large bridge on my nose, and to get a frame that would fit, that was on the rack, was very difficult.
When I was told you could order them online, I found it very helpful to be able to find the frame. I put in the parameters of what I'd need with those sizes—the bridge size, the width size—and suddenly those were all the frames that came that would fit on my face and be useful to me. You do not have that when you go to the mall or to your optician or whoever to try to get a pair of glasses. You have a much greater opportunity to choose a set of glasses. That's what I really appreciated.
I did buy a set of glasses and it was quite nice, and there's your commercial.
You are expanding into a global market. We live in the same part of the world, where you have the United States competing in the Vancouver market, and yet the Canadian market does not aggressively go after a larger market south of the border. It's always baffled me why that is not happening.
About eight years ago, a study from the Centre for the Study of Living Standards—I'm sure both of you are aware of that study—highlighted that fact, that the U.S. is moving forward more quickly and adopting these new technologies more quickly than Canada. Why is that? I don't know if you want to refer to that study, if you have your own opinions, but I'm surprised that, as business entrepreneurs, Canadians are not grasping....
Mr. Collins, you've done it yourself, but why are other Canadians not doing what you've done?
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I've spent time in elected public office and I've spent time in business. I have found it fascinating trying to relate public policy at the board table level in business and trying to relate business to political leaders. I sometimes feel as if I'm translating ancient Greek into Mandarin or something. They have very different environments and different cultures, but both manage risk.
I think when business manages risk, they look at what they have. They're always trying to grow their business, and trying to do that in a profitable way. They look at the risks that are available to them or the risks that are in front of them, and then they determine how to allocate that capital.
In the United States, you can amortize that investment over a much larger market. The U.S. market is immense. It's the single largest market, I guess. The European Community is very large as well. I think that's why U.S. businesses see the upside of that capital investment and that risk-taking to be immense. The downside is you can only go to zero. In Canada, it's often a challenge to grow a business, given our interprovincial non-tariff trade barriers. We sometimes downplay that impact, but it's often very difficult to do business across jurisdictions in Canada.
If I had one thing to advise or to suggest as a public policy initiative.... On the books of 10 provinces, three territories, and the federal government, there are, literally, thousands of pieces of legislation and millions of regulations. The vast majority were drafted and implemented before the Internet existed. Given my time in public office, one of the things I found most advantageous was to make sure that we made it easy for business to take their capital and invest it and minimize their risk. One of the ways we can do that is to make it easier to do business and to modernize our regulations and our legislation.
So I think one of the simplest things—I shouldn't say it's simple, it's very difficult, but one of the biggest things that government could do to advance Internet technology and the risk-taking by entrepreneurs that needs to happen in the economy is to make sure an obstacle is not being created just because we haven't got around to modernizing the legislation and regulations.
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Currently, probably a third of our sales are in Canada. It's certainly our largest market. The company started in Vancouver, so it has greater market penetration there.
The rest of the sales would be export sales. The largest markets are in Europe, particularly northern Europe, Scandinavia. The United States is growing extremely quickly. Australia and New Zealand are also big and very fast-growing markets for us. We are also in Japan. I think we're the number two provider of contact lenses in Japan. We've just started marketing very lightly into Brazil.
It might be interesting for the committee to know that when we do research on our customers, the largest market penetration per capita is actually in rural and remote parts of the country. We don't receive a huge number of customers from there, but as a percentage of the population, it's by far the highest in the north or in rural areas, where access to cost-effective eye care is very expensive, or not in existence in some communities.
They all get deliveries from Canada Post, but it may be very difficult to go down and get a great product at a great price.